The Accumulation/Distribution index by Marc Chaikin is a cumulative total volume, with volume each day added or subtracted in proportion to where the close is between that day’s high and low. For c, h, l, v and with ADprev as yesterday’s Acc/Dist the formula is
C - L AD = ADprev + V * (2 * ----- - 1) H - L
When the close is at the high the factor is +1 and the full volume is added in, when the close is at the low the factor is -1 and the full volume is subtracted. In between is in proportion, so for instance a close at 75% of the range would be a factor +0.5, or a close midway would be a factor 0 for no change to the Acc/Dist.
The starting point (ie. the zero point) for the running total is arbitrary. In Chart it’s merely the segment of data first displayed.
The name accumulation/distribution comes from the idea that during accumulation buyers are in control and the price will be bid up through the day, or will make a recovery after being sold down, in any case finishing near the high. Vice versa for distribution.
Acc/Dist is somewhat similar to On-Balance Volume (see On-Balance Volume). But Acc/Dist looks at close within that day’s range, whereas OBV looks just at close-to-close up or down. An Acc/Dist calculation within an N-day window can be made too, see Chaikin Money Flow.
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